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Costco, Lennar, Pepsi, JPMorgan and Micron are part of Zacks Earnings Preview
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For Immediate Release
Chicago, IL – September 30, 2019 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes Costco (COST - Free Report) , Lennar (LEN - Free Report) , Pepsi (PEP - Free Report) , JPMorgan (JPM - Free Report) and Micron (MU - Free Report) .
Weak Start to Q3 2019 Earnings Season
The Q3 reporting season will really get underway when the big banks report results in mid-October, but the earnings season has actually started already with results from 15 S&P 500 members out. We have another 7 index members on deck to report results this week, including Costco, Lennar, Pepsi and others.
The 15 S&P 500 members that have reported already and the 7 index members coming out with results this week have fiscal quarters ending in August, which we count as part of our September-quarter tally. The fact is that by the time JPMorgan reports September-quarter results on October 15th, we will have seen such Q3 results from almost two dozen S&P 500 members already.
Expectations for 2019 Q3 & Beyond
It is premature to draw any firm conclusions from the results that have come out already, but we are off to a weak start, particularly on the revenues front. Not only is revenue growth for these 15 index members tracking below what we had seen for the same group in other recent periods, but the proportion of these companies beating revenue estimates is also comparing unfavorably.
The earnings decline of -22.1% is very notable, but this is primarily because of the very tough comparisons for Micron whose Q3 earnings were down -86.7% on -42.3% lower revenues. What is even more notable, however, is the revenue performance.
There is no reason to think that this sub-par trend will persist as the reporting cycle really gets going, but it is a weak start.
For Q3 as a whole, total earnings for the index are expected to decline -4.7% from the same period last year on +4.3% higher revenues, with 12 of the 16 Zacks sectors expected to have lower earnings compared to the year-earlier period, including the Tech sector.
We will know what the final Q3 earnings growth pace turns out to be when all the results are in, but we know that they will be better than these expectations, likely close to the flat line that we saw in the first half of the year.
Tough comparisons to last year when growth was boosted by the tax cut legislation were all along expected to weigh on earnings growth in 2019.
Moderating U.S. economic growth and notable slowdowns in other major global economic regions are having a further negative impact. Uncertainty about the global trade regime and growing resort to tariffs are not helping matters either.
The overall tone and substance of management guidance during the last earnings season was on the negative side. This reflected a combination of slowing economic growth, particularly beyond the U.S., and rising input expenses. As a result, analysts steadily lowered their estimates for 2019 Q3.
The Tech Sector Drag
As you can see, earnings growth is expected to be in negative territory for 12 of the 16 Zacks sectors, with Energy, Basic Materials, and Technology expected to experience double-digit declines. The Finance sector is able to eke out a modestly positive growth rate in Q3.
It is the weak Tech growth that is dragging the aggregate Q3 earnings growth rate for the S&P 500 index into negative territory. The Tech sector is the biggest earnings contributor in the S&P 500 index, bringing in 22.9% of the index’s total earnings in forward 4-quarter period. Excluding the Tech sector’s drag, total earnings growth for the remainder of the index would be down only -2.7% (-4.7% with Tech included).
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Costco, Lennar, Pepsi, JPMorgan and Micron are part of Zacks Earnings Preview
For Immediate Release
Chicago, IL – September 30, 2019 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes Costco (COST - Free Report) , Lennar (LEN - Free Report) , Pepsi (PEP - Free Report) , JPMorgan (JPM - Free Report) and Micron (MU - Free Report) .
Weak Start to Q3 2019 Earnings Season
The Q3 reporting season will really get underway when the big banks report results in mid-October, but the earnings season has actually started already with results from 15 S&P 500 members out. We have another 7 index members on deck to report results this week, including Costco, Lennar, Pepsi and others.
The 15 S&P 500 members that have reported already and the 7 index members coming out with results this week have fiscal quarters ending in August, which we count as part of our September-quarter tally. The fact is that by the time JPMorgan reports September-quarter results on October 15th, we will have seen such Q3 results from almost two dozen S&P 500 members already.
Expectations for 2019 Q3 & Beyond
It is premature to draw any firm conclusions from the results that have come out already, but we are off to a weak start, particularly on the revenues front. Not only is revenue growth for these 15 index members tracking below what we had seen for the same group in other recent periods, but the proportion of these companies beating revenue estimates is also comparing unfavorably.
The earnings decline of -22.1% is very notable, but this is primarily because of the very tough comparisons for Micron whose Q3 earnings were down -86.7% on -42.3% lower revenues. What is even more notable, however, is the revenue performance.
There is no reason to think that this sub-par trend will persist as the reporting cycle really gets going, but it is a weak start.
For Q3 as a whole, total earnings for the index are expected to decline -4.7% from the same period last year on +4.3% higher revenues, with 12 of the 16 Zacks sectors expected to have lower earnings compared to the year-earlier period, including the Tech sector.
We will know what the final Q3 earnings growth pace turns out to be when all the results are in, but we know that they will be better than these expectations, likely close to the flat line that we saw in the first half of the year.
Tough comparisons to last year when growth was boosted by the tax cut legislation were all along expected to weigh on earnings growth in 2019.
Moderating U.S. economic growth and notable slowdowns in other major global economic regions are having a further negative impact. Uncertainty about the global trade regime and growing resort to tariffs are not helping matters either.
The overall tone and substance of management guidance during the last earnings season was on the negative side. This reflected a combination of slowing economic growth, particularly beyond the U.S., and rising input expenses. As a result, analysts steadily lowered their estimates for 2019 Q3.
The Tech Sector Drag
As you can see, earnings growth is expected to be in negative territory for 12 of the 16 Zacks sectors, with Energy, Basic Materials, and Technology expected to experience double-digit declines. The Finance sector is able to eke out a modestly positive growth rate in Q3.
It is the weak Tech growth that is dragging the aggregate Q3 earnings growth rate for the S&P 500 index into negative territory. The Tech sector is the biggest earnings contributor in the S&P 500 index, bringing in 22.9% of the index’s total earnings in forward 4-quarter period. Excluding the Tech sector’s drag, total earnings growth for the remainder of the index would be down only -2.7% (-4.7% with Tech included).
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Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
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Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.